DECLARATION OF REMUNERATION AND INCENTIVES 2017

This declaration describes Ilmarinen’s remuneration and incentive systems, which entered into force on 1 January 2016. The systems have been decided on by the Board of Directors.

Ilmarinen’s remuneration consists of the following elements: 

  • basic salary and allowances
  • fringe benefits and benefits
  • performance-based bonus systems
  • personnel fund
  • project-specific target bonus
  • President and CEO’s special bonus
  • Ilahduttaja bonus
  • practices in celebrating employee milestones
  • supplementary pensions
  • other-than-monetary remuneration

The goal of Ilmarinen’s remuneration and incentive systems is to encourage Ilmarinen’s employees to achieve excellent results that support the achievement of the strategic goals and to operate according to Ilmarinen’s values, and to ensure their commitment and motivation. Through the systems we also wish to strengthen Ilmarinen’s attractiveness in the eyes of current and future experts.  

1. Basic principles for remuneration and incentives

1.1. Remuneration principles

Ilmarinen’s remuneration is competitive, fair and equal, steering and supportive. Remuneration is based on how demanding a position is and on personal performance and competence.

Ilmarinen complies with the collective and wage agreement for the insurance sector’s salaried employees.

Ilmarinen’s current fringe benefits subject to tax are meals, use of telephone and unlimited company car benefit. Any company car benefit is included in the total salary.

1.2.  Incentive principles

According to the Board of Directors’ policy, Ilmarinen’s incentives:

  • support the company’s strategic goals and long-term interests, and the implementation of its values
  • are coherent and open and designed to encourage excellent performance
  • are responsible and in line with good risk management
  • are competitive but reasonable.

The strategic goals on which the incentives are based support the objective of the company’s operations as a statutory earnings-related pension company. Our incentive systems meet the requirements set by regulations, are in line with good and efficient risk management and do not encourage uncontrolled risk taking.

There are three performance-based bonus systems:

  • Performance-based bonus system for management
  • Performance-based bonus system for investment operations
  • General performance-based bonus system


An Ilmarinen employee can only belong to one performance-based bonus system at a time.

The Board of Directors decides on the performance-based bonus systems, their contents, terms, target groups, maximum bonuses and bonus criteria, and the validity of the system.

The Board of Directors sets the company’s annual targets and long-term targets, their indicators, target levels and weights. In addition the Board of Directors monitors compliance with the terms of the incentive system and regularly assesses the effectiveness of the incentive systems.

The task of the Board’s Nomination and Compensation Committee is to assist the Board of Directors and prepare matters for the Board to discuss that are related to the company’s remuneration and incentive systems and the Executive Group’s nomination and incentive matters. 

2. Incentives for President and CEO and other management (management’s performance-based bonus system)

The goal of the management’s performance-based bonus system is to ensure the realisation of Ilmarinen’s strategic goals and values in the long term. It is competitive, steering and supportive. It motivates key persons to achieve excellent results and engages them in achieving the company’s challenging targets.

The management’s performance-based bonus system covers the President and CEO, Deputy CEO, division heads (excl. CIO), heads of units and department managers. Also experts and supervisors working in key positions can be invited to join the management’s performance-based bonus system subject to a decision by Ilmarinen’s Board of Directors.

The CIO, other investment division executives and the Head of Risk Management are part of a separate investment operations performance-based bonus system.

In the management’s performance-based bonus system bonuses are partially tied to annual targets and partially to three-year targets:

  • The corporate-level and division/department/personal targets set for one year ensure that each of the key targets set for the year are achieved.
  • The three-year targets that support the achievement of Ilmarinen’s key strategic goals ensure the achievement of Ilmarinen’s strategy and Ilmarinen’s key long-term success factors.

2.1. Earnings periods

The system consists of three three-year-long earnings periods beginning in consecutive years during the strategy period 2016–2020. The Board of Directors sets annual bonus targets for the first calendar year of each earnings period, which are in force for an earnings period lasting one year. The Board of Directors also sets three-year strategic goals at the beginning of each earnings period.

During 2018, the Board of Directors will decide whether a new three-year period will start from the beginning of 2019 and how possible annual bonuses will be determined after 2018.

2.2. Maximum bonuses

The maximum amount of the President and CEO’s performance-based bonus for each three-year earnings period can be a maximum of an amount corresponding to the 12-month calculated monthly salary, taking into account both annual and long-term targets.

The maximum amount of the performance-based bonus for the Executive Group’s members, i.e. the division heads (excl. Chief Investment Officer (CIO)) for each three-year earnings period can be a maximum of an amount corresponding to the 8-month calculated monthly salary, taking into account both annual and long-term targets.

The maximum amount of performance-based bonus paid to the CIO can be no more than an annual amount corresponding to the 12-month calculated monthly salary.

2.3. Deferring of significant bonuses and obstacles to payment of bonuses

According to legislation on pension insurance companies, significant bonuses should be deferred. The bonus is considered significant if, at the moment of payment, it exceeds EUR 50,000 or the calculated monthly salary of the bonus recipient for two months, if it is larger than EUR 50,000. Sixty per cent of the significant bonus is paid in the year following the end of the earnings year and the remaining 40 per cent is paid during the next three years in equal instalments. 

The Board of Directors decides annually on the payment of bonuses. The performance-based bonus or its unpaid instalment can be left unpaid or it can be recovered later as an unjustified benefit if internal or external regulations have not been complied with or an unusual risk has been taken or the earnings criteria and/or targets set for them linked to the system have been manipulated.

In addition, the Board of Directors can decide on the non-payment of bonuses or their as yet unpaid instalments, the reduction of the bonus amounts or the changing of the payment date (also with deferred bonuses) for reasons resulting from the company’s financial situation or changes in conditions.

2.4. Other benefits and terms for management

In addition to the statutory earnings-related pension, the President and CEO and his/her Deputy are covered by voluntary unit-linked defined-contribution supplementary pension insurance. The retirement age of Ilmarinen’s President and CEO and Deputy CEO is 63 years. The costs resulting from the defined-contribution supplementary pension insurance are 20 per cent of the annual earnings. The amount of supplementary pension is the insurance savings that have accrued to the benefit of the insured from insurance contributions and the performance of the insurance policy’s funds. The accrued supplementary pension is paid until the age of 70.

The retirement age of other executives and employees is based on the Employees Pensions Act (TyEL).

The period of notice for the President and CEO’s contract is six months when the President and CEO hands in his/her notice and 12 months when the company terminates the contract. If the President and CEO materially breaches his/her duties as defined in the President and CEO’s contract or as prescribed by law, the company has the right to terminate the contract immediately without any payment obligation to the President and CEO. The period of notice for the Deputy CEO is six months on both the part of the company and Deputy CEO.  

Ilmarinen’s current fringe benefits subject to tax are meals, use of telephone and unlimited company car benefit. Any company car benefit is included in the total salary.

3. Performance-based bonus system for investment operations

The investment function’s performance-based bonus system strengthens the realisation of Ilmarinen’s strategic goals and values. It steers and encourages the achievement of excellent results, engages and motivates. We distil the personal targets from the strategy and they can be development or performance targets related to the employee’s tasks or company/division/department targets.

The system covers all of the persons working in the investment division and risk management tasks in the risk management unit’s investment operations.

The performance indicators for the performance-based bonuses of the investment division personnel are related to the success of the investment operations and achievement of personal targets. With regards to people working in risk management in tasks supporting investment operations, targets should be defined such that the independence of the people working in these tasks is not compromised. The performance indicators for the performance-based bonus should include both shared indicators measuring long-term risk management success and indicators measuring the achievement of personal targets.

The performance-based bonus cannot be more than an amount corresponding to 1–12 calculated monthly salaries. The maximum performance-based bonus is defined based on a person’s position.

The deferral of any bonuses and criteria for the payment of the bonuses: see section 2.3.

4. Personnel bonuses

4.1 General performance-based bonus system

Ilmarinen employees who are not covered by the performance-based bonus systems for the management or investment operations are covered by the general performance-based bonus system.

The system strengthens the realisation of Ilmarinen’s strategic goals and values. It steers and encourages the achievement of excellent results, engages and motivates. We distil the personal targets from the strategy and they can be development or performance targets related to the employee’s tasks or division/department targets. In order to receive a bonus, the annual targets must be achieved or exceeded. Persons belonging to the general performance-based bonus system do not have corporate-level targets on their corporate scorecards. The personnel fund’s profit bonus system provides bonuses based on Ilmarinen’s success.

The performance-based bonus cannot be more than an amount corresponding to 1–3.5 calculated monthly salaries. The maximum performance-based bonus is defined based on a person’s position. 

The deferral of any bonuses and criteria for the payment of the bonuses: see section 2.3.

4.2 Personnel fund

The personnel fund awards Ilmarinen personnel for achieving corporate-level targets.

According to the rules of the fund, the personnel fund covers the entire personnel of Ilmarinen with the exception of executives separately named by Ilmarinen.

Ilmarinen’s Board of Directors decides on the amount of profit bonus (= personnel fund unit) to be transferred each year based on the results of the performance indicators that support Ilmarinen’s long-term success and that have been defined beforehand and distilled from the strategy. The determination criteria of the profit bonus system are discussed jointly with personnel fund and personnel representatives, and Ilmarinen’s Board of Directors may annually modify them.

The maximum amount of profit sharing is a sum equal to a fund member’s two weeks’ salary.

5. Fees of the members of the governing bodies

Ilmarinen’s General Meeting decides on the fees for the Supervisory Board.

The Supervisory Board decides on the fees for the Board of Directors and its committees.

The Election Committee prepares proposals on members and their fees for both the General Meeting and the Supervisory Board. The Election Committee consists of members of the Supervisory Board and the Board of Directors. The Election Committee is elected by the Supervisory Board, which also decides on its fees.

The members of the Supervisory Board receive annual fees and a meeting fee for meetings of the Supervisory Board, supervision events and Election Committee meetings. Absence from the Supervisory Board meetings results in a deduction from the annual fee.

The members of the Board of Directors receive an annual fee and a meeting fee for meetings of the Board of Directors, its committees and the Election Committee.

Pension accrues on the work of governing body members in accordance with TyEL. Members of the governing bodies are not covered by the company’s other incentive or supplementary pension systems. The fees are paid in cash.  

The fees of the members of the governing bodies and information on meeting attendance and incentives for the senior management can be found in the Report on Remuneration for 2016 (below).

19 Feb 2016

This declaration describes Ilmarinen’s remuneration and incentive systems, which entered into force on 1 January 2016. The systems have been decided on by the Board of Directors. The description of the remuneration and incentive system in place in 2015 is available at the bottom of this page.

Ilmarinen’s remuneration consists of the following elements:

  • basic salary and allowances
  • fringe benefits and benefits
  • performance-based bonus systems
  • personnel fund
  • project-specific target bonus
  • President and CEO’s special bonus
  • Ilahduttaja bonus
  • practices in celebrating employee milestones
  • supplementary pensions
  • other-than-monetary remuneration

 The goal of Ilmarinen’s remuneration and incentive systems is to encourage Ilmarinen’s employees to achieve excellent results that support the achievement of the strategic goals and to operate according to Ilmarinen’s values, and to ensure their commitment and motivation. Through the systems we also wish to strengthen Ilmarinen’s attractiveness in the eyes of current and future experts. 

1. Basic principles for remuneration and incentives

1.1. Remuneration principles

Ilmarinen’s remuneration is competitive, fair and equal, steering and supportive. Remuneration is based on how demanding a position is and on personal performance and competence.

Ilmarinen complies with the collective and wage agreement for the insurance sector’s salaried employees.

Ilmarinen’s current fringe benefits subject to tax are meals, use of telephone and unlimited company car benefit. Any company car benefit is included in the total salary.

1.2. Incentive principles

According to the Board of Directors’ policy, Ilmarinen’s incentives:

  • support the company’s strategic goals and long-term interests, and the implementation of its values
  • are coherent and open and designed to encourage excellent performance
  • are responsible and in line with good risk management
  • are competitive but reasonable.

The strategic goals on which the incentives are based support the objective of the company’s operations as a statutory earnings-related pension company. Our incentive systems meet the requirements set by regulations, are in line with good and efficient risk management and do not encourage uncontrolled risk taking.

There are three performance-based bonus systems:

  • Performance-based bonus system for management
  • Performance-based bonus system for investment operations
  • General performance-based bonus system

An Ilmarinen employee can only belong to one performance-based bonus system at a time.

The Board of Directors decides on the performance-based bonus systems, their contents, terms, target groups, maximum bonuses and bonus criteria, and the validity of the system.

The Board of Directors sets the company’s annual targets and long-term targets, their indicators, target levels and weights. In addition the Board of Directors monitors compliance with the terms of the incentive system and regularly assesses the effectiveness of the incentive systems.

The task of the Board’s Nomination and Compensation Committee is to assist the Board of Directors and prepare matters for the Board to discuss that are related to the company’s remuneration and incentive systems and the Executive Group’s nomination and incentive matters. 

2. Incentives for President and CEO and other management (management’s performance-based bonus system)

The goal of the management’s performance-based bonus system is to ensure the realisation of Ilmarinen’s strategic goals and values in the long term. It is competitive, steering and supportive. It motivates key persons to achieve excellent results and engages them in achieving the company’s challenging targets.

The management’s performance-based bonus system covers the President and CEO, Deputy CEO, division heads (excl. CIO), heads of units and department managers. Also experts and supervisors working in key positions can be invited to join the management’s performance-based bonus system subject to a decision by Ilmarinen’s Board of Directors.

The CIO, other investment division executives and the Head of Risk Management are part of a separate investment operations performance-based bonus system.

In the management’s performance-based bonus system bonuses are partially tied to annual targets and partially to three-year targets:

  • The corporate-level and division/department/personal targets set for one year ensure that each of the key targets set for the year are achieved.
  • The three-year targets that support the achievement of Ilmarinen’s key strategic goals ensure the achievement of Ilmarinen’s strategy and Ilmarinen’s key long-term success factors.
2.1. Earnings periods

The system consists of three three-year-long earnings periods beginning in consecutive years during the strategy period 2016–2020. The Board of Directors sets annual bonus targets for the first calendar year of each earnings period, which are in force for an earnings period lasting one year. The Board of Directors also sets three-year strategic goals at the beginning of each earnings period.

During 2018, the Board of Directors will decide whether a new three-year period will start from the beginning of 2019 and how possible annual bonuses will be determined after 2018.

2.2. Maximum bonuses

The maximum amount of the President and CEO’s performance-based bonus for each three-year earnings period can be a maximum of an amount corresponding to the 12-month calculated monthly salary, taking into account both annual and long-term targets.

The maximum amount of the performance-based bonus for the Executive Group’s members, i.e. the division heads (excl. Chief Investment Officer (CIO) for each three-year earnings period can be a maximum of an amount corresponding to the 8-month calculated monthly salary, taking into account both annual and long-term targets.

The maximum amount of performance-based bonus paid to the CIO can be no more than an annual amount corresponding to the 12-month calculated monthly salary.

2.3. Deferring of significant bonuses and obstacles to payment of bonuses

According to legislation on pension insurance companies, significant bonuses should be deferred. The bonus is considered significant if, at the moment of payment, it exceeds EUR 50,000 or the calculated monthly salary of the bonus recipient for two months, if it is larger than EUR 50,000. 60% of the significant bonus is paid in the year following the end of the earnings year and the remaining 40 per cent is paid during the next three years in equal instalments.

The Board of Directors decides annually on the payment of bonuses. The performance-based bonus or its unpaid instalment can be left unpaid or it can be recovered later as an unjustified benefit if internal or external regulations have not been complied with or an unusual risk has been taken or the earnings criteria and/or targets set for them linked to the system have been manipulated.

In addition, the Board of Directors can decide on the non-payment of bonuses or their as yet unpaid instalments, the reduction of the bonus amounts or the changing of the payment date (also with deferred bonuses) for reasons resulting from the company’s financial situation or changes in conditions.

2.4. Other benefits and terms for management

In addition to the statutory earnings-related pension, the President and CEO and his/her Deputy are covered by voluntary unit-linked defined-contribution supplementary pension insurance. The retirement age of Ilmarinen’s President and CEO and Deputy CEO is 63 years. The costs resulting from the defined-contribution supplementary pension insurance are 20 per cent of the annual earnings. The amount of supplementary pension is the insurance savings that have accrued to the benefit of the insured from insurance contributions and the performance of the insurance policy’s funds. The accrued supplementary pension is paid until the age of 70.

The retirement age of other executives and employees is the general old-age retirement age based on the Employees Pensions Act (TyEL).

The period of notice for the President and CEO’s contract is six months when the President and CEO hands in his notice and 12 months when the company terminates the contract. If the President and CEO materially breaches his/her duties as defined in the President and CEO’s contract or as prescribed by law, the company has the right to terminate the contract immediately without any payment obligation to the President and CEO. The period of notice for the Deputy CEO is six months on both the part of the company and Deputy CEO. 

Ilmarinen’s current fringe benefits subject to tax are meals, use of telephone and unlimited company car benefit. Any company car benefit is included in the total salary.

3. Performance-based bonus system for investment operations

The investment function’s performance-based bonus system strengthens the realisation of Ilmarinen’s strategic goals and values. It steers and encourages the achievement of excellent results, engages and motivates. We distil the personal targets from the strategy and they can be development or performance targets related to the employee’s tasks or company/division/department targets.

The system covers all of the persons working in the investment division and risk management tasks in the risk management unit’s investment operations.

The performance indicators for the performance-based bonuses of the investment division personnel are related to the success of the investment operations and achievement of personal targets. With regards to people working in risk management in tasks supporting investment operations, the performance indicators measuring their performance-based bonuses are linked to the solvency ratio that measures the success of risk management at a company level and to the achievement of personal targets.

The performance-based bonus cannot be more than an amount corresponding to 1–12 calculated monthly salaries. The maximum performance-based bonus is defined based on a person’s position. 

The deferral of any bonuses and criteria for the payment of the bonuses: see section 2.3.

4. Personnel bonuses

4.1. General performance-based bonus system

Ilmarinen employees who are not covered by the performance-based bonus systems for the management or investment operations are covered by the general performance-based bonus system.

The system strengthens the realisation of Ilmarinen’s strategic goals and values. It steers and encourages the achievement of excellent results, engages and motivates. We distil the personal targets from the strategy and they can be development or performance targets related to the employee’s tasks or division/department targets. In order to receive a bonus the annual targets must be achieved or exceeded. Persons belonging to the general performance-based bonus system do not have corporate-level targets on their corporate scorecards. The personnel fund’s profit bonus system provides bonuses based on Ilmarinen’s success.

The performance-based bonus cannot be more than an amount corresponding to 1–3.5 calculated monthly salaries. The maximum performance-based bonus is defined based on a person’s position.

The deferral of any bonuses and criteria for the payment of the bonuses: see section 2.3.

4.2. Personnel fund

The personnel fund awards persons belonging to the general performance-based bonus system for achieving corporate-level targets.

According to the rules of the fund, the personnel fund covers the entire personnel of Ilmarinen with the exception of executives separately named by Ilmarinen.

Ilmarinen’s Board of Directors decides on the amount of profit bonus (= personnel fund unit) to be transferred each year based on the results of the performance indicators that support Ilmarinen’s long-term success and that have been defined beforehand and distilled from the strategy. The determination criteria of the profit bonus system are discussed jointly with personnel fund and personnel representatives, and Ilmarinen’s Board of Directors may annually modify them.

The maximum amount of profit sharing is a sum equal to a fund member’s two weeks’ salary.

5. Fees of the members of the governing bodies

Ilmarinen’s General Meeting decides on the fees for the Supervisory Board.

The Supervisory Board decides on the fees for the Board of Directors and its committees.

The Election Committee prepares proposals on members and their fees for both the General Meeting and the Supervisory Board. The Election Committee consists of members of the Supervisory Board and the Board of Directors. The Election Committee is elected by the Supervisory Board, which also decides on its fees.

The members of the Supervisory Board receive annual fees and a meeting fee for meetings of the Supervisory Board, supervision events and Election Committee meetings. Absence from the Supervisory Board meetings results in a deduction from the annual fee.

The members of the Board of Directors receive an annual fee and a meeting fee for meetings of the Board of Directors, its committees and the Election Committee.

Pension accrues on the work of governing body members in accordance with TyEL. Members of the governing bodies are not covered by the company’s other incentive or supplementary pension systems. The fees are paid in cash.

The fees of the members of the governing bodies and information on meeting attendance and incentives for the senior management can be found in the Report on Remuneration  for 2015 (see bottom of page).

Fees of the members of the Supervisory Board

Ilmarinen’s Annual General Meeting decided on 9 April 2014 to keep the fees of the members of the Supervisory Board unchanged. The Chairman of the Supervisory Board is paid an annual fee of EUR 5,000, the Deputy Chairman is paid a fee of EUR 3,800, and other Board members are paid EUR 2,500. The meeting fee for the Supervisory Board meetings and supervision events is EUR 500. Absence from the Supervisory Board meetings results in a deduction of EUR 750 per meeting from the annual fee. The amendment came into force as of the Supervisory Board meeting held on 19 November 2014. Pension accrues on the work of the Supervisory Board’s members in accordance with TyEL.

The Supervisory Board met twice in 2014.

Fees of the Board of Directors

The Supervisory Board decided on 19 November 2014 that the annual fee of the Chairman of the Board of Directors for 2015 is EUR 38,000, the fee of the Deputy Chairman is EUR 27,000, the fee of the Chairman of the Audit and Risk Management Committee is EUR 20,000, the members’ fee is EUR 16,000 and the deputy members’ fee is EUR 13,000. The meeting fee for the meetings of the Board of Directors and the Nomination and Compensation Committee is EUR 500. The meeting fee for the Audit and Risk Management Committee is EUR 750.   

Pension accrues on the work of the Board of Directors’ members in accordance with TyEL.

The Board of Directors met 12 times in 2014.

Financial benefits and retirement age of the senior management

The annual remuneration of the members of Ilmarinen’s senior management consists of the monthly salary including fringe benefits, annual bonus and the long-term bonuses for senior management.

Remuneration and   incentives paid in 2014

Annual salary [1]

Annual bonus

Senior management’s long-term bonus [3]

Total

President and   CEO

501,094.27

112,531.61 [2a]

73,752.70

687,378.58

The company’s   Deputy CEO 

368,562.77

223,557.62 [2b]

30,360.86

622,481.25

Other executive   members of the Executive Group (8 persons)

1,348.139.52

132,381.08 [2c]

166,178.66

 

 

1,646,699.26

[1] The annual salary includes the basic salary and fringe benefits (meals, telephone and unlimited company car benefit)

[2a] The annual bonus paid in 2014 consists of the following items: EUR 96,029.11 in annual bonus earned in 2013 (60% of total bonus) and EUR 16,502.50 from annual bonus earned in 2012 and deferred to 2014 (20% of total bonus).

[2b] The annual bonus paid in 2014 consists of the following items: EUR 197,427.12 in annual bonus earned in 2013 (60%) and EUR 26,130.50 from annual bonus earned in 2012 and deferred to 2014 (20%).

[2c] Annual bonus earned in 2013 and paid in 2014. 

[3] The long-term bonus for senior management earned in 2010–2012 and to be paid in instalments in 2013–2016.

The first earnings period of the management’s long-term bonus system for 2010–2012 terminated on 31 December 2012. In April 2013, the Board of Directors approved 42.8% of the maximum bonus as the actual percentage for remuneration. The bonuses for the earnings period are paid in four instalments in 2013–2016. The amount of deferred bonus instalments is influenced by the annual nominal net return percentage on Ilmarinen’s investment activities. This may either increase or decrease the bonus instalments to be paid.

Harri Sailas served as President and CEO until 31 January 2015 and will retire at the age of 63 on 1 May 2015. Timo Ritakallio started as Ilmarinen’s President and CEO on 1 February 2015. Ritakallio’s monthly salary as of 1 February 2015 is EUR 40,000. His maximum annual bonus equals six months’ salary. In addition he is part of the management’s long-term bonus system in which the maximum annual bonus is 30 per cent of the estimated annual salary. The Deputy CEO as of 1 February 2015 is Sini Kivihuhta. Her monthly salary is EUR 16,000, the maximum annual bonus is equal to two months’ salary and the annual maximum bonus from the management’s long-term bonus system is 30 per cent of the estimated annual salary. The above-mentioned monthly salaries include a company car benefit. The other fringe benefits include meals and telephone benefits. 

The basis for determining the bonuses for senior management is described below under “Ilmarinen’s incentive system.”

The Board of Directors decided in October 2014 to change the supplementary pension insurance of the President and CEO and Deputy CEO from defined-benefit to defined-contribution and to raise the retirement age to 63 years as of 1 January 2015. The costs resulting from the defined-contribution supplementary pension insurance are 20 per cent of the annual earnings. The costs for the terminated defined-benefit supplementary pension insurance equalled EUR 217,792.39 in 2014.

The retirement age of other executives and employees is the general old-age retirement age, 63 to 68 years.

The period of notice for the President and CEO’s contract is 6 months when the President and CEO hands in his notice and 12 months when the company terminates the contract. If the President and CEO materially breaches his duties as defined in the President and CEO’s contract or as prescribed by law, the company has the right to terminate the contract immediately without any payment obligation to the President and CEO. The period of notice for the Deputy CEO is 6 months. 

Ilmarinen’s incentive system

Incentives are part of the overall remuneration and reflect the ability to generate profits while also creating flexibility in the salary structure. The principles of the incentive system are:

* Steering function: Incentives are based on the Ilmarinen’s strategy, challenging targets and their achievement during the target period. The criteria for measuring whether the targets have been met are related to customer-specific results, long-term investment income, cost efficiency and personnel satisfaction, among others.

* Long-term success: Ilmarinen’s incentives are aligned with the company’s statutory mission, business strategy, targets, values and long-term interests. They are also compatible with adequate and effective risk management and do not promote excessive risk taking. The company furthermore complies with the Finnish Financial Supervisory Authority’s general recommendation to defer the payment of major performance-based bonuses of a person whose professional activities could cause significant risk to the company.

* Profitability: The objective of incentives is to promote excellent performance.

* Commitment: Incentives are intended to foster commitment among the personnel to enable Ilmarinen to continue securing the best resources even in the future.

There are two types of incentive:

1) short-term incentives tied to annual targets and

2) long-term incentives tied to the entire strategy period. The senior management has its own long-term bonus system. The rest of the personnel participate in a profit-sharing bonus transferred to the personnel fund.

The Board of Directors’ Compensation and Nomination Committee prepares matters pertaining to incentives. Ilmarinen’s Board of Directors decides on the structure and scope of the incentive system and on the targets and indicators included in the corporate scorecard and confirms the actual results. The Board regularly assesses the functionality and costs of the system, among other things.

The incentive system covers everyone employed by Ilmarinen according to the principles approved by the Board. The decisions on paying the bonuses must be approved by the superior of the superior of the person concerned. The annual bonuses of executives nominated by the Board are approved by the Nomination and Compensation Committee.

1) Incentives based on annual targets

General principles

Ilmarinen’s annual bonus system consists of four incentive systems: the general, investment activity, sales and the President and CEO’s annual bonus systems. Each person can only belong to one of these systems.

A precondition for being included in the bonus systems based on annual targets is a valid employment relationship in accordance with the terms and conditions of the bonus system.

Compliance with internal and external regulations is also taken into account when assessing the performance of a specific person. The performance-based bonus is not paid and bonuses considered to be an unjustified benefit can be recovered if the person in question has acted in breach of the law, against authorities’ orders, Ilmarinen’s internal guidelines or the Code of Conduct.  

The main rule is that the annual bonuses are paid during the year following the target year. The annual bonuses are paid in periodical instalments in the separate systems for investment activities and sales.

In accordance with the Finnish Financial Supervisory Authority’s guidelines the payment of major annual bonuses to persons whose activities significantly impact the company’s risk position is deferred. This group includes the President and CEO, executives of the Executive Group, persons who report directly to the Chief Investment Officer and the Head of Risk Management.

If the annual performance-based bonuses paid to these persons exceed EUR 50,000, 60 per cent of the bonus is paid during April in the year following the target year and the rest in two equal instalments as follows: the first deferred instalment during the second year following the target year and the rest during the third year following the target year. However, the payment is not deferred even if the annual performance-based bonus exceeds EUR 50,000 if it equals no more than the recipient’s fixed total salary for two months.

If Ilmarinen’s financial result at current value for the incentive period is negative the Board of Directors will re-assesses the criteria and payment, if any. A possible re-assessment also applies to deferred bonuses.

Furthermore, there is no entitlement for a deferred bonus if it turns out that the target that the person was in charge of was achieved by taking an unusual risk which will be realised before the payment of the deferred bonus.

General annual bonus system

The system covers all Ilmarinen employees who are not included in the investment activity, sales or the President and CEO’s annual bonus systems.

The performance-based bonus consists of targets on three levels: the company’s performance, the targets of the employee’s own team, and how personal targets have been met. The weighting of the targets on different levels and the maximum bonus sums vary according to the requirements of the tasks. The maximum bonuses equal 0.9–2 months’ salary as calculated from the monthly salary on which the bonus is based. To achieve the maximum bonus, complete success is required and all the targets must be exceeded on all levels. The Executive Group members’ (excl. President and CEO and Deputy CEO) maximum bonuses equal two months’ salary as calculated from the monthly salary on which the bonus is based.

Annual bonus system for investment operations

The annual bonus system for the investment operations covers all employees working in the investment division and in investment-related tasks in the risk management department. The performance targets and measures for risk management are independent of those of the investment division.

The Board of Directors’ Nomination and Compensation Committee annually approves the bonus groups, the related tasks, the maximum total performance-based bonuses to be paid on the basis of this system for the target year, and the Chief Investment Officer’s annual performance-based bonus.

Ilmarinen’s Board of Directors decides on the system and may modify or dismantle it partway through a bonus period. If the return on Ilmarinen’s investment operations for the period is negative, the company’s Board of Directors will re-assess the maximum bonuses of the investment division. The bonuses for risk management personnel are independent of the performance of the investment operations, but their incentive criteria and payment of bonuses, if any, may also be re-assessed by the Board of Directors.

Each employee has been assigned to a bonus group according to his/her position and the maximum bonus is specified in terms of monthly salaries. There are altogether ten groups, and the maximum bonuses range between 1.25 and 12 months’ salaries. The amount of personal performance-based bonus can vary, depending on the work performance, between zero and the specified maximum bonus. The total amount of performance-based bonuses in the investment division (= bonus pool) may not, however, exceed an amount corresponding to nine months’ monthly salaries of the persons included in the bonus system.

The targets for the annual bonuses of the investment division personnel are related to the success of the corporate-level investment operations and achievement of personal targets. Those in leadership positions additionally have targets related to good leadership practices. As in the general annual bonus system, the annual bonus of those in risk management positions is determined on the basis of targets on three levels.

Annual bonus system for sales

The annual bonus system for the sales department is to a large extent based on the same conditions as Ilmarinen’s general annual bonus system. It covers the key personnel working at the sales interface and the persons whose scorecards focus on sales and customer relations management or its immediate support. The targets are related to sales figures, customer loyalty and customer satisfaction. The maximum annual bonus for sales personnel is equal to the salary for 3.5 months as calculated from the monthly salary on which the bonus is based.

Annual bonus of the President and CEO and the Deputy CEO

The Board of Directors decides on the criteria and maximum amount of the annual bonus of the President and CEO and the Deputy CEO. The Board of Directors’ Nomination and Compensation Committee decides on the annual bonus to be paid to the President and CEO and the Deputy CEO.

The annual bonus of the President and CEO depends solely on whether the company’s targets have been met or not. The President maximum bonus equals 6 months’ salary.

The Deputy CEO, Sini Kivihuhta, is included, based on her position, in the general annual bonus system. The Deputy CEO’s maximum bonus equals 2 months’ salary.

2) Long-term incentives

Long-term incentive system for senior management

The long-term incentive system for senior management was adopted at Ilmarinen in 2010. The current earnings period lasts three years, from 1 January 2013 to 31 December 2015. The Board of Directors can decide to start a new earnings period upon the end of the current earnings period.

Success in achieving long-term strategic goals is the main focus of the system. Around 60 key persons are covered by the system, including the President and CEO and the Executive Group.

The amount of the bonuses depends on achieving the criteria set in advance by the Board of Directors during the earnings period of three consecutive years. The earnings criteria are related to the market share, solvency and the ratio of operating expenses to expense loading components. The bonus component determined on the basis of investments will not be paid if the average return on investments is less than the average discount rate for the same period.

The amount of the maximum bonus approved for the earnings period 2013—2015 is annually adjusted according to the nominal net return rate of the company’s investment operations. Additionally, the amount of the unpaid bonus approved for the earnings period 2013—2015 is annually adjusted according to the nominal net return rate of the company’s investment operations. The nominal net return on the company’s investment operations may be positive or negative, and it may increase or decrease the amount of the maximum bonus and unpaid bonus.

The Board of Directors decides the maximum bonus amount for each key person included in the target group for the earnings period. The maximum bonus is denominated in euros and based on the key person’s estimated annual earnings (excl. paid bonuses). The maximum bonus amounts annually to 30% of the annual salary; for the persons covered by the annual bonus system for investment operations the maximum bonus amounts to 15% of the annual salary.

The bonus, if any, is paid during the following four years starting from the end of the earnings period. The first earnings period ended on 31 December 2012, and the bonuses earned according to it will be paid in 2013–2016. The next earnings period is set to end on 31 December 2015, and the bonuses earned according to it will be paid in 2016–2019.

The bonus or a part of it may be withheld and bonuses considered as an unjustified benefit can be recovered if the person in question has acted in breach of the law, against authorities’ orders, Ilmarinen’s internal guidelines or the Code of Conduct.

The Board of Directors may decide to withhold bonuses or to recover them also if it turns out that the target-based performance was manipulated or achieved by taking an unusual risk which will be realised before the payment of the bonus.

The Board of Directors regularly reviews the system and decides on all the particularities related to the system.

Personnel fund

The persons not covered by the long-term incentive system for senior management are members of the personnel fund in accordance with the rules of the fund. The personnel fund was founded in 2010.

The activities and decision making of a personnel fund are regulated by The Act on Personnel Funds. The personnel owns and controls the fund, with the purpose of managing the personnel fund items and other assets referred to in the Act on Personnel Funds. The precondition of founding a personnel fund was a profit bonus system decided by the company, according to which Ilmarinen pays a share of its profits to the fund. The determination criteria of the profit bonus system are discussed jointly with the representatives of the personnel fund and the company’s Board of Directors may annually modify them.

The profit bonus to be transferred to the fund is determined according to the realised performance indicators specified annually by the Board of Directors. These are based on the company’s strategic targets and the criteria of the incentive system for senior management. The company must be sufficiently solvent to pay profit bonuses. The maximum amount of profit sharing is a sum equal to two weeks’ salary.

Other matters related to incentives

Ilmarinen has in place a special bonus that can be awarded by the CEO on recommendation by the recipient’s supervisor. The criteria are exceptional performance or achievements which significantly exceed the set targets. 

Fees of the members of the Supervisory Board

In compliance with the decision made by Ilmarinen’s Annual General Meeting on 9 April 2014, the fees of the members of the Supervisory Board shall remain unaltered until the Annual General Meeting 2015. The Chairman of the Supervisory Board is paid a fee of EUR 5,000 per annum, the Deputy Chairman is paid a fee of EUR 3,800 per annum, and other Board members are paid EUR 2,500 per year. The fee for the Supervisory Board meetings and supervision events is EUR 500 per meeting. Starting from the autumn meeting 2014, absence from the Supervisory Board meetings results in a deduction of EUR 750 per meeting from the annual fee. Pension accrues on the work of the Supervisory Board’s members in accordance with TyEL.

The Supervisory Board met twice in 2013.

Fees of the Board of Directors

In compliance with a decision by the Supervisory Board, the annual fee of the Chairman of the Board of Directors for 2014 is EUR 38,000, the fee of the Deputy Chairman is EUR 27,000, the members’ fee is EUR 16,000 and the deputy members’ fee is EUR 13,000. The annual fee of the chairman of the Audit and Risk Management Committee is EUR 20,000. The fee for the meetings of the Board of Directors and the Nomination and Compensation Committee is EUR 500 per meeting.  The meeting fee for the Audit and Risk Management Committee is EUR 750 per meeting.  

Pension accrues on the work of the Board of Directors’ members in accordance with TyEL.

The Board of Directors met 11 times in 2013.

Financial benefits and retirement age of the senior management

The remuneration of Ilmarinen’s senior management consists of the salary including benefits, annual bonus and the long-term bonuses for senior management. 

Remuneration and   incentives paid in 2013

Annual salary

Annual performance-based bonus [1]

Senior management’s long-term bonus [2]

Total

President and   CEO

500,469.87 [3]

49,506

67,170

617,145.87

The company’s   Deputy CEO 

363,298.04 [4]

78,392

27,651

469,341.04

Other executive   members of the Executive Group (8 persons)

1,314,618.17[4]

81,703

151,348

1,547,669.17

[1] Annual bonus accrued in 2012 and paid in 2013

[2] The long-term bonus for senior management accrued in 2010–2012 and to be paid in instalments in 2013–2016.

[3] The salary includes the basic salary and benefits (meals, telephone, unlimited company car benefit and accommodation until 5 March 2013)

[4] The salary includes the basic salary and benefits (meals, telephone and unlimited company car benefit )

 

The first earnings period of the management’s long-term bonus system for 2010–2012 terminated on 31 December 2012. In April 2013, the Board of Directors approved 42.8% of the maximum bonus as the actual percentage for remuneration.

The bonuses for the earnings period are paid in four instalments in 2013–2016. The amount of deferred bonus instalments is influenced by the annual nominal net return percentage on Ilmarinen’s investment activities. This may either increase or decrease the bonus instalments to be paid.

The basis for determining the remuneration for senior management is described below under “Ilmarinen’s incentive system.”

The retirement age of Ilmarinen’s President and CEO and Deputy CEO is 62 years. The Board of Directors and the President and CEO agreed on 19 February 2012 that the President and CEO’s employment relationship will continue until the spring of 2015, when the President and CEO turns 63. In addition to the statutory earnings-related pension, the President and CEO and his Deputy are covered by voluntary defined-benefit supplementary pension insurance. In 2013, the costs of the voluntary supplementary pension insurance for the President and CEO and Deputy CEO totalled EUR 763,699.82; the contribution for the President and CEO was EUR 634,127,33 and the contribution for the Deputy CEO was EUR 129,572.49. The total pension, which consists of the earnings-related pension and supplementary pension, is 60 per cent of the salary on which the supplementary pension is based. The salary on which the supplementary pension is based is calculated according to the annual earnings for the past five full years in the present employment relationship. The President and CEO’s supplementary pension accrual ended when he turned 62 on 12 December 2013. No costs shall arise from his supplementary pension insurance after this.

The retirement age of other executives and employees is the general old-age retirement age, 63 to 68 years.

If the company terminates the President and CEO’s contract, the period of notice is 12 months; if the President and CEO hands in his notice, the period of notice is six months. The Deputy CEO’s period of notice is three months in both cases. If the company terminates the Deputy CEO’s contract, he or she will be paid compensation equalling the total salary for 12 months, including the salary for the three-month period of notice.

Ilmarinen’s incentive system

General description

Incentives are part of the overall remuneration and reflect the ability to generate profits while also creating flexibility in the salary structure. The principles of the incentive system are:

* Steering function: Incentives are based on the Ilmarinen’s strategy, challenging targets and their achievement during the target period. The criteria for measuring whether the targets have been met are related to customer-specific results, long-term investment income, cost efficiency and personnel satisfaction, among others.

* Long-term success: Ilmarinen’s incentives are aligned with the company’s statutory mission, business strategy, targets, values and long-term interests. They are also compatible with adequate and effective risk management and do not promote excessive risk taking. The company furthermore complies with the Finnish Financial Supervisory Authority’s general recommendation to defer the payment of major performance-based bonuses of a person whose professional activities could cause significant risk to the company.

* Profitability: The objective of incentives is to promote excellent performance.

* Commitment: Incentives are intended to foster commitment among the personnel to enable Ilmarinen to continue securing the best resources even in the future.

Two kinds of incentives exist: short-term incentives tied to annual targets and long-term incentives tied to the entire strategy period. The senior management has its own long-term bonus system and the rest of the personnel participate in a profit-sharing bonus transferred to the personnel fund.

The Board of Directors’ Compensation and Nomination Committee prepares matters pertaining to incentives. Ilmarinen’s Board of Directors decides on the structure and scope of the incentive system and on the targets and indicators included in the corporate scorecard and confirms the actual results. The Board regularly assesses the functionality and costs of the system, among other things. The incentive system covers everyone employed by Ilmarinen according to the principles approved by the Board. The decisions on paying the bonuses must be approved by the superior of the superior of the person concerned. The annual bonuses of executives nominated by the Board are approved by the Nomination and Compensation Committee.

Incentives based on annual targets

General principles

Ilmarinen’s annual bonus system consists of four incentive systems; the general, investment activity, sales and the President and CEO’s annual bonus systems. Each person can only belong to one of these systems.

A precondition for being included in the bonus systems based on annual targets is a valid employment relationship in accordance with the terms and conditions of the bonus system.

Compliance with internal and external regulations is also taken into account when assessing the performance of a specific person. The performance-based bonus is not paid and bonuses considered to be an unjustified benefit can be recovered if the person in question has acted in breach of the law, against authorities’ orders, Ilmarinen’s internal guidelines or the Code of Conduct.  

The main rule is that the annual bonuses are paid during the year following the target year. The annual bonuses are paid in periodical instalments in the separate systems for investment activities and sales.

The payment of major annual bonuses to persons whose activities may significantly impact the company’s risk position is deferred in accordance with the Finnish Financial Supervisory Authority’s guidelines. This group includes the President and CEO, members of the Executive Group, persons who report directly to the Chief Investment Officer and the Head of Risk Management.

If the annual performance-based bonuses paid to these persons exceed EUR 50,000, 60 per cent of the bonus is paid during April in the year following the target year and the rest in two equal instalments as follows: the first deferred instalment during the second year following the target year and the rest during the third year following the target year. However, the payment is not deferred even if the annual performance-based bonus exceeds EUR 50,000 if it equals no more than the recipient’s fixed total salary for two months.

If Ilmarinen’s financial result at current value for the incentive period is negative the Board of Directors will re-assesses the criteria and payment, if any. The re-assessment of the payment will also include deferred bonuses.

Furthermore, there is no entitlement for a deferred bonus if it turns out that the target that the person was in charge of was achieved by taking an unusual risk which will be realised before the payment of the deferred bonus.

General annual bonus system

The system covers all Ilmarinen employees who are not included in the investment activity, sales or the President and CEO’s annual bonus systems.

The performance-based bonus consists of targets on three levels: the company’s performance, the targets of the employee’s own team, and how personal targets have been met. The weighting of the targets on different levels and the maximum bonus sums vary according to the requirements of the tasks. The maximum bonuses equal 0.9–2 months’ salary as calculated from the monthly salary on which the bonus is based. To achieve the maximum bonus, complete success is required and all the targets must be exceeded on all levels. The Executive Group members’ (excl. President and CEO and Deputy CEO) maximum bonuses equal two months’ salary as calculated from the monthly salary on which the bonus is based.

Annual bonus system for investment operations

The annual bonus system for the investment operations covers all employees working in the investment division and in investment-related tasks in the risk management department. The performance targets and measures for risk management are independent of those of the investment division.

The Board of Directors’ Nomination and Compensation Committee annually approves the bonus groups, the related tasks, the maximum total performance-based bonuses to be paid on the basis of this system for the target year, and the Chief Investment Officer’s annual performance-based bonus.

Ilmarinen’s Board of Directors decides on the system and may modify or dismantle it partway through a bonus period. If the return on Ilmarinen’s investment operations for the period is negative, the company’s Board of Directors will re-assess the maximum bonuses of the investment division. The bonuses for risk management personnel are independent of the performance of the investment operations, but their incentive criteria and payment of bonuses, if any, may also be re-assessed by the Board of Directors.

Each employee has been assigned to an bonus group according to his/her position and the maximum bonus is specified in terms of monthly salaries. There are altogether ten groups, and the maximum bonuses range between 1.25 and 12 months’ salaries. The amount of personal performance-based bonus can vary, depending on the work performance, between zero and the specified maximum bonus. The total amount of performance-based bonuses in the investment division (= bonus pool) may not, however, exceed an amount corresponding to nine months’ monthly salaries of the persons included in the bonus system.

The targets for the annual bonuses of the investment division personnel are related to the success of the corporate-level investment operations and achievement of personal targets. Those in leadership positions additionally have targets related to good leadership practices. As in the general annual bonus system, the annual bonus of those in risk management positions is determined on the basis of targets on three levels.

Annual bonus system for sales

The annual bonus system for the sales department is to a large extent based on the same principles as Ilmarinen’s general bonus system. It covers the key personnel working at the sales interface and the persons whose scorecards focus on sales and customer relations management or its immediate support. The targets are related to sales figures, customer loyalty and customer satisfaction. The maximum annual bonus for sales personnel is equal to the salary for three and a half (3.5) months as calculated from the monthly salary on which the bonus is based.

Annual bonus of the President and CEO and the Deputy CEO

The Board of Directors decides on the annual bonus of the President and CEO and the Deputy CEO. The Board of Directors’ Nomination and Compensation Committee decides on the amount of the annual bonus paid to the President and CEO and the Deputy CEO.

The annual bonus of the President and CEO and the Deputy CEO depends solely on whether the company’s targets have been met or not. The President and CEO’s maximum bonus equals the six-month salary.

The Deputy CEO’s is included, based on his/her position, in the annual bonus system for investment operations. The Deputy CEO’s maximum bonus equals the 12-month salary.

Long-term incentives

Long-term incentive system for senior management

The long-term incentive system for senior management was adopted at Ilmarinen in 2010. The current earnings period lasts three years, from 1 January 2013 to 31 December 2015. The Board of Directors can decide to start a new earnings period upon the end the current earnings period. Success in achieving long-term strategic goals is the main focus of the system. Around 60 key persons are covered by the system, including the President and CEO and the Executive Group.

The amount of the bonuses paid under the long-term incentive system for senior management depends on achieving the criteria set in advance by the Board of Directors during the earnings period of three consecutive years.  The earnings criteria are related to the market share, solvency and the ratio of operating expenses to expense loading components. The bonus component determined on the basis of investments will not be paid if the average return on investments is less than the average discount rate for the same period.

The amount of the maximum bonus approved for the earnings period 2013—2015 is annually adjusted according to the nominal net return rate of the company’s investment operations. Additionally, the amount of the unpaid bonus approved for the earnings period 2013—2015 is annually adjusted according to the nominal net return rate of the company’s investment operations. The nominal net return on the company’s investment operations may be positive or negative, and it may increase or decrease the amount of the maximum bonus and unpaid bonus.

The Board of Directors decides the maximum bonus amount for each key person included in the target group for the earnings period. The maximum bonus is denominated in euros and based on the key person’s estimated annual earnings (excl. paid annual bonuses). The maximum bonus amounts annually to 30% of the annual salary; for the persons covered by the annual bonus system for investment operations the maximum bonus amounts to 15% of the annual salary.

The bonus, if any, is paid during the following four years starting from the end of the earnings period. The first earnings period ended on 31 December 2012, and the bonuses earned according to it will be paid in 2013–2016. The next earnings period is set to end on 31 December 2015, and the bonuses earned according to it will be paid in 2016–2019.

The bonus or a part of it may be withheld and bonuses considered as an unjustified benefit can be recovered if the person in question has acted in breach of the law, against authorities’ orders, Ilmarinen’s internal guidelines or the Code of Conduct.

The Board of Directors may decide to withhold bonuses or to recover them also if it turns out that the target-based performance was manipulated or achieved by taking an unusual risk which will be realised before the payment of the bonus.

The Board of Directors regularly reviews the system and decides on all the particularities related to the system.

Personnel fund

The persons not covered by the long-term incentive system for senior management are members of the personnel fund in accordance with the rules of the fund. The personnel fund was founded in 2010.

The activities and decision making of a personnel fund are regulated by The Act on Personnel Funds. The personnel owns and controls the fund, with the purpose of managing the personnel fund items and other assets referred to in the Act on Personnel Funds. The precondition of founding a personnel fund was a profit bonus system decided by the company, according to which Ilmarinen pays a share of its profits to the fund. The determination criteria of the profit bonus system are discussed jointly with the representatives of the personnel fund and the company’s Board of Directors may annually modify them.

The profit bonus to be transferred to the fund is determined according to the realised performance indicators specified annually by the Board of Directors. These are based on the company’s strategic targets and the criteria of the incentive system for senior management. The company must be sufficiently solvent to pay profit bonuses. The maximum amount of profit sharing is a sum equal to two weeks’ salary.

Other matters related to incentives

Ilmarinen additionally makes use of the CEO’s special bonus that can be awarded on recommendation by the recipient’s supervisor for exceptional performance or achievements which significantly exceed the set targets.